NYT: Not Spending Is Not Saving

Economics blogger Dean Baker asserts that "about the only thing that readers can learn from an article on Japan in the business section today" is that "The New York Times Doesn't Like Japan" (Beat the Press, 2/22/09). Among the piece's "variety of complaints about Japan's economy, many of which are contradictory," is "the standard line about people not spending because deflation means that goods will be cheaper in the future if they wait"–which Baker debunks by noting that, with "deflation…generally less than 1.0 percent," a Japanese shopper "considering buying a $600 television would save approximately 50 cents by delaying the purchase a month." Finding this motivation "unlikely" to make many "delay purchases of big-ticket items," Baker also examines a "chart accompanying the article [that] complains that consumers are 'neither spending nor saving'":

This is bizarre, because saving simply means not spending, so, if consumers are not spending, then by definition they are saving. In fact, this chart shows a big increase in consumption over the last 20 years, with the saving rate having fallen from more than 15 percent in 1985 to about 4 percent in 2005. The article later complains that consumers are not spending because they don't have confidence in the country's pension system (which it tells us is a warning to the United States), but it is not clear how much lower they would want the saving rate to go.

That "the chart shows that nominal consumption has fallen by more than household income" has Baker explaining that this "implies that either taxes have increased or the data in the chart is inaccurate."